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16 July 2007
The UK government under the new prime minister Gordon Brown has revealed that it wants more longer term fixed rate mortgages on the market to help make property purchase easier and more affordable for first time buyers and existing homeowners.
Interest rates have been rising rapidly over the past year, with five interest rates of 0.25 percent each taking the base rate from 4.5 percent last August to 5.75 percent this July.
As a result of this homeowners have seen their mortgage repayments rise dramatically in some cases, and first time buyers have been put off entering the property market because of the risk of further rises.
In view of the current economic climate in the housing sector the new Chancellor of the Exchequer, Alistair Darling, stated earlier this week that it was important for longer term fixed rate mortgages to be both available and affordable in order to give consumers a chance to get onto and stay on the property ladder without fear of rising repayments due to interest rate rises.
Many homeowners have seen their repayments shoot up because of the recent interest rate rises, and there are fears that in some cases this could push households into the red to the point where they may lose their homes as a result of being unable to keep up with repayments.
Mr Darling is now calling for fixed term mortgages that offer terms of around 25 years, which means that mortgage payers could enjoy the benefit of fixed repayments throughout the term of the mortgage in some cases.
However, although this will provide financial stability some officials are wondering how many people will want to be tied into a fixed rate for such a long time, and the adverse result that this could have in the event that interest rates go down.
In his announcement Alistair Darling stated: "When you look around the rest of Europe, it is more common to have longer-term fixed rates. We need to look at that. We need to reduce the volatility."
Following the government announcement regarding longer term fixed rate mortgage availability one of the UK's leading building societies, the Nationwide, has announced the launch of a new 25 year fixed rate deal. The building society states that it ran a similar product before and that this proved quite popular.
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